Karnataka HC Greenlights Consolidated GST Notices Spanning Years – A Win for Revenue Efficiency

In a landmark ruling, the Karnataka High Court Division Bench of Justices S.G. Pandit and K.V. Aravind has declared that show cause notices (SCNs) under Sections 73 and 74 of the Central Goods and Services Tax (CGST) Act, 2017, can legitimately cover multiple financial years. This decision, delivered on April 23, 2026, in a batch of writ appeals (WA Nos. 1751/2024 and connected matters), reverses single judge orders that had quashed such "consolidated" notices as impermissible. The Revenue – various Central Tax Commissioners – challenged the quashing, arguing for procedural flexibility in tackling widespread tax discrepancies.

From Single Judge Setback to Division Bench Reversal

The saga began when assessees like M/s Chimney Hills Education Society, Veremax Technologie Services Ltd., and others filed writ petitions against SCNs issued by tax authorities. These notices alleged short payments, erroneous refunds, or wrongful input tax credit (ITC) claims – some involving fraud or suppression – spanning periods from July 2017 to March 2023. Single judges, relying on Madras HC's Titan Company Ltd. and local precedents like Bangalore Golf Club , held that GST proceedings are inherently "financial year-specific," quashing the notices and allowing fresh year-wise issuances.

Revenue appealed, clubbing cases with similar facts across different financial years. As news reports from the time noted, this pitted administrative pragmatism against taxpayer pleas for ring-fenced assessments.

Revenue's Pitch: "Any Period" Means Flexibility, Not Rigidity

Appellants, represented by Senior Standing Counsels like Aravind V. Chavan and M. Unnikrishnan, hammered on the statutory language. Sections 73 (non-fraud cases) and 74 (fraud/suppression) empower notices for "any period" , not confined to a single financial year or tax period (defined under Section 2(106) as return-filing cycles). They cited Delhi HC's Mathur Polymers (2026) and Ambika Traders (2025), plus Allahabad's SA Aromatics (2026), where consolidated SCNs were upheld, especially for ITC fraud networks spanning years.

Key defenses included: - No explicit bar : Sub-sections like 73(3)/74(3) allow extending notices to "such periods" with identical grounds. - Limitation intact : Sub-section (10) timelines (3/5 years from annual return due date) apply per period, not diluting protections. - Pecuniary jurisdiction : CBIC Circulars (e.g., No. 254/11/2025-GST) handle aggregation by transferring to competent officers. - Practicality : Fraud like bogus ITC (Rs. 44,015 crore evasion via 29,273 fake firms, per 2024 MoF data) demands holistic probes.

Additional Advocate General Aditya Vikram Bhat added that writs against mere SCNs are premature, with statutory appeals available.

Assessees' Counter: FY Lock-In to Guard Limitation, Jurisdiction

Respondents, led by Senior Counsels A. Shankar and K.K. Chythanya, insisted the GST ecosystem – from returns (Sections 37-39, 44) to audits (65-66) – is FY-centric. Forms like DRC-01 reference "tax period/FY," and blending fraud (Section 74, 5-year limit) with non-fraud (Section 73, 3-year) risks extending deadlines improperly. They warned of jurisdiction shifts via pecuniary limits and cited opposing views: Bombay's Milroc Good Earth (2025), Kerala's Tharayil Medicals (2025), Madras' Titan (2024), and Andhra's S.J. Constructions (2025).

Intervenors like M/s Century Real Estate echoed GST Council minutes (53rd meeting) favoring FY-specific probes under emerging Section 74A.

Decoding the Statute: "Any Period" Trumps FY Fetish

The Bench dissected the CGST Act's architecture. Returns and self-assessments (Chapters IX-XII) are periodic, but demand/recovery (Chapter XV) via Sections 73/74 targets defaults broadly. "Tax period" applies to filings, not notices; "any period" signals scope beyond FYs. Sub-sections 73(3)/74(3)-(4) explicitly permit expansions, rendering FY-only readings absurd.

Rejecting form-driven limits (DRC-01's "tax period" optional per notes), the Court aligned with Delhi/Allabahad/J&K HCs, dissent from Bombay/Kerala/Madras/Andhra. Pecuniary tweaks via circulars and per-period limitation scrutiny ensure fairness. Notably, a Bombay DB later referred Milroc doubts to a larger bench (April 2026).

Key Observations

"On a combined reading of the provisions of the Act and particularly Sections 73 and 74 of the Act, the irresistible conclusion would be that the proceedings under Sections 73 and 74 of the Act were never intended to be confined to a financial year."

"The expression ' any period ' is not defined under the Act and cannot be equated with ' tax period .'"

"Issuance of a consolidated show cause notice would not dilute or take away the protection of limitation available under Sub-Section (10) of Sections 73 and 74."

"There is no statutory bar to issuance of a common show cause notice covering multiple tax periods or financial years."

Appeals Allowed: SCNs Revived, Appeals Directed

The writ appeals succeeded; impugned orders set aside, writs dismissed. SCNs restored with 4-week reply liberty (most cases); assessees in two appeals get 6 weeks for statutory appeals sans limitation bar. Adjudication looms, merits open.

This pro-Revenue pivot streamlines GST enforcement against ITC rackets, curbing multiplicity while preserving safeguards. Future probes gain clarity: one notice can unravel multi-year evasions, potentially reshaping thousands of disputes.